Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2006 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-32686 VIACOM INC. (Exact name of registrant as specified in its charter) DELAWARE 20-3515052 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1515 Broadway New York, NY 10036 (212) 258-6000 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) Securities Registered Pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered Class A Common Stock, $0.001 par value New York Stock Exchange Class B Common Stock, $0.001 par value New York Stock Exchange 6.85% Senior Notes due 2055 New York Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: None (Title Of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ As of the close of business on June 30, 2006, the last business day for the registrant’s most recently completed second fiscal quarter, there were 61,541,108 shares of the registrant’s Class A common stock, par value $0.001 per share, and 654,448,196 shares of its Class B common stock, par value $0.001 per share, outstanding. The aggregate market value of Class A common stock held by non-affiliates as of June 30, 2006 was approximately $528.8 million (based upon the closing price of $35.95 per share as reported by the New York Stock Exchange on that date). The aggregate market value of Class B common stock held by non-affiliates as of June 30, 2006 was approximately $22.15 billion (based upon the closing price of $35.84 per share as reported by the New York Stock Exchange on that date). As of January 31, 2007, 59,297,997 shares of our Class A common stock and 632,860,140 shares of our Class B common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of Viacom Inc.’s Notice of 2007 Annual Meeting of Stockholders and Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended (the “Proxy Statement”) (Portion of Item 5) (Part III). Table of Contents TABLE OF CONTENTS PART I Item 1. Business. 1 Item 1A. Risk Factors. 18 Item 1B. Unresolved Staff Comments. 24 Item 2. Properties. 24 Item 3. Legal Proceedings. 25 Item 4. Submission of Matters to Vote of Security Holders. 25 PART II Item 5. Market for Viacom Inc.’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 28 Item 6. Selected Financial Data. 30 Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition. 31 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 65 Item 8. Financial Statements and Supplementary Data. 65 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. 111 Item 9A. Controls and Procedures. 111 Item 9B. Other Information. 111 PART III Item 10. Directors, Executive Officers and Corporate Governance. 112 Item 11. Executive Compensation. 112 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 112 Item 13. Certain Relationships and Related Transactions, and Director Independence. 112 Item 14. Principal Accounting Fees and Services. 112 PART IV Item 15. Exhibits, Financial Statement Schedules. 113 SIGNATURES 114 Table of Contents PART I Item 1. Business. Viacom is a leading global entertainment content company with prominent and respected brands. Engaging our audiences through television, motion pictures and digital platforms, we seek to reach our audiences however they consume content. We manage our operations through two reportable operating segments: (i) Media Networks (formerly Cable Networks), which includes MTV Networks and BET Networks; and (ii) Filmed Entertainment (formerly Entertainment), which includes Paramount Pictures Corporation and Famous Music. MEDIA NETWORKS MTV Networks reaches over 496 million households via its multiplatform properties, which include the cable television program services MTV: Music Television®, VH1®, CMT®: Country Music Television™, Logo™, Nickelodeon®, Nick at Nite®, COMEDY CENTRAL®, Spike TV® and TV Land®, among others, and digital properties such as MTV.com, URGE™, COMEDY CENTRAL.com, VSPOT™, TurboNick™, NeoPets®, Xfire® and iFilm®. MTV Networks operated 135 television networks and 171 websites and broadband services around the world as of December 31, 2006, and programs content to numerous other digital and mobile outlets. BET Networks is the nation’s leading provider of entertainment, music, news and public affairs television programming targeting African-American audiences. BET provides diverse programming content via multiplatform properties, including its cable television program services BET®, BETJ™, BET Gospel® and BET Hip Hop®, and its digital properties BET.com® and BET Mobile™. The primary BET channel reaches more than 83 million domestic households, and can be seen in the United States, Canada and the Caribbean. BET also provides programming content via its broadband site, BET on Blast, as well as other digital and mobile outlets. FILMED ENTERTAINMENT One of the original major motion picture studios, Paramount has been a leading producer and distributor of feature films since 1912 and has a library consisting of approximately 3,500 motion pictures and programs. The Paramount Motion Picture Group produces and distributes motion pictures under such well-known brands as Paramount Pictures®, DreamWorks®, Paramount Vantage™, Paramount Classics™, MTV Films® and Nickelodeon Movies™. It distributes motion pictures and other entertainment content on DVD, video-on demand, cable services and other platforms in the United States and internationally. Famous Music produces and distributes music to a diversified range of global media, including television programs, motion pictures and digital outlets. Its catalog spans seven decades and ranges from classics to hits from contemporary artists. 1 Table of Contents Our Media Networks segment derives revenues principally from advertising sales, affiliate fees and ancillary sales, which include sales of home entertainment products and the licensing of consumer products. Revenues from the Filmed Entertainment segment are generated primarily from feature film exhibition, including motion pictures in theatrical release, home entertainment product, and distribution to pay and basic cable television, broadcast television and syndicated television. Revenues from the Media Networks segment accounted for 63%, 70% and 71% of our revenues for 2006, 2005 and 2004, respectively, and revenues from the Filmed Entertainment segment accounted for 38%, 31% and 31% of our revenues for those periods, respectively, with elimination of intercompany revenues being (1)%, (1)% and (2)%, respectively. We generated approximately 24% of our total revenues in 2006 from international operations, principally in Europe, 22% in 2005 and 21% 2004. In 2006, our total international revenues were $2.77 billion, of which 63% was generated in Europe. Our Separation from CBS Corporation On December 31, 2005, we became a stand-alone public company in connection with our separation from the former Viacom Inc. (“Former Viacom”), which is now known as CBS Corporation. In connection with the separation, each share of Former Viacom Class A common stock was converted into the right to receive 0.5 of a share of Viacom Class A common stock and 0.5 of a share of CBS Corporation Class A common stock. Similarly, each share of Former Viacom Class B common stock was converted into the right to receive 0.5 of a share of Viacom Class B common stock and 0.5 of a share of CBS Corporation Class B common stock. We were organized as a Delaware corporation in 2005 and our principal offices are located at 1515 Broadway, New York, New York 10036. Our telephone number is (212) 258-6000 and our website is www.viacom.com. References to “Viacom,” “Company,” “we,” “us” and “our” refer to Viacom Inc. and our consolidated subsidiaries through which our various businesses are conducted, unless the context requires otherwise. Information on our website is not intended to be incorporated into this annual report. Recent Developments In accordance with the terms of our Separation Agreement with CBS Corporation, on December 29, 2005 we paid a preliminary special dividend to Former Viacom of $5.40 billion, which was subject to adjustments for, among other items, actual Former Viacom debt as of the date of the separation and actual CBS Corporation cash flow for the full year 2005.